Growth of Federal Government

It probably won’t surprise you that the Federal Government was added more employees in the last ten years. Actually, according to the Bureau of Labor Statistics the Federal Government added 300,000 employees from 2000 to 2010. This is an increase of 16%. Though I believe this is a big problem, it is only the tip of the iceberg.

The real issue is their compensation. According to the U.S. Bureau of Economic Analysis the average compensation for civilian (non-military) employees rose from $51,518 in 2000 to $81,258 in 2010. That is a shocking increase of 58% when compared to a 30% increase in the private sector ($38,862 to $50,462). Those additional 300,000 employees cost you and I an average of an additional 24 billion dollars per year. Even if the Federal government had kept the same number of employees as 2000, the increase in compensation, as compared to the private sector (58% vs. 30%) costs the taxpayer over 31 billion dollars per year.

To rephrase an old quote “A billion here a billion there, eventually it adds up to real money”.

Tax Rates

The United States started taxing income in 1913. At that time the highest tax bracket was 7%, while now, 98 years later,  it is 35%. What is amazing about the rate is not that it has gone up 28% but that is has come down from an all time high of 90% in 1945. In fact it was over 70% from 1936 - 1970. The problem with the amout that Americans pay for income taxes is not the rate but rather the base on which it is computed. In 1913 you paid a 7% tax on earnings over $500,000. Today you pay a 35% tax on earnings over $373,651. By the way $500,000 in 1913 would be worth $11,012,929 today.